Retention of staff is a massive problem and it’s not just about money. Acorn looks at ways of keeping your teams happy.
The issue of staff retention is no longer confined to a handful of sectors that have traditionally experienced difficulties. It was top of the bosses’ list of worries in an American Management Association study last year and 70 per cent of UK organisations reported it to be a problem in a 1999 survey by the Industrial Relations Service (IRS).
Worsening skills shortage are exacerbating the problem. The recent Reed Skills Index Survey of over 550 organisations found that 68 per cent of UK employers were struggling to find suitably qualified staff.
What is more, the cost of replacing staff is estimated to be between one and one and half times annual salary when recruitment, training and development, disruption to clients and colleagues and loss of knowledge is taken into account.
Loyalty
Spiralling salaries suggests that in the current buoyant labour market some employers have reacted in knee-jerked fashion to increases in staff turnover. But our research shows that more pay does not necessarily mean more loyalty.
Just as important is creating an environment that people are happy to stay in. To do this, employers need a more holistic approach that combines valuing staff by providing stimulating work and recognising their individual contribution. The key message is that managers do not only need to look beyond monetary rewards but also begin with staff retention process at the selection stage, not after two to five years when employees may be thinking of changing jobs. Two studies we conducted highlight the extent of the staff retention challenge and what organisations are doing about it:
The Dublin practice did-in-depth research amongst 50 large employers in Ireland, where two-thirds of organisations are experiencing skills shortages. It showed they were most at risk of losing IT, marketing, technicians, multi-lingual staff (call-centre) and specialist staff who can sell their knowledge on.
Feedback from these employers also confirmed that compensation and benefits are not overriding factors when people leave. The key reasons cited were:
- A lack of career progression;
- Opportunities to learn new skills;
- A balanced life;
- Values;
- Earning power.
The employers questioned regularly monitored attrition rates and retention spans and had introduced a range of retention measures. They included revamping terms and conditions, changing salary bands and improving merit increases, flexible working arrangements, creation of explicit career paths and development programmes.
A leading recruitment consultancy also commissioned us to investigate why turnover of UK consultants was increasing. Structured telephone interviews with recent leavers, established that people welcomed the chance to openly discuss their reasons with a third part and that in none of the cases was salary given as the motivation to move on.
They attributed the decision the leave, to have resulted from an inaccurate view of the company before joining, unfulfilled job expectations and a perceived lack of development opportunities. The company has since implemented a structured induction process and created a number of career paths for consultants.
Ingredients
The challenge for employers is to find the key ingredients that will bind people to the organisation, enhance their job satisfaction and therefore commitment.
Research has identified a strong relationship between lack of organisational commitment and turnover, as well as links between high levels of organisational commitment and positive high levels of organisational commitment and positive attributes such as motivation and job satisfaction. The extent to which pre-joining expectations of work-related experiences are met is vital in this regard. Fulfilling new recruits’ expectations of work fosters commitment to their employer, whereas the psychological contract and realistic job previews come into play. Providing a realistic preview of the job helps provide the basis for a mutually agreed psychological contract.
The psychological contract defines the employment relationship and manages the mutual expectations of the employer and employee. Although a psychological contract may include some economic components such as expectations of reasonable pay levels, it will also include other issues, such as expectations of being treated with dignity and fairness, having opportunities to learn and develop etc. The organisation will have its own implicit expectations such as that employees will be loyal, keep trade secrets, do their best on behalf of the organisation and so on.
Values
A positive contract will result in employees who display organisational citizenship behaviour (i.e. making contributions to the organisation that go beyond the prescribed role); high commitment to the organisation (i.e. low labour turnover and absence); higher motivation which will lead to higher performance; and greater individual well-being including a sense of security, positive feelings about work and job satisfaction.
Culture fit is another critical aspect. Employees will commit to a company whose culture and values they connect with. For example, an employee that values risk-taking and innovation is more likely to thrive in an organisation that encourages experimentation rather than one that encourages a cautious approach.
Research amongst graduates into organisation and employee expectations, shows a move to more value-based recruitment: employers are seeking to attract and retain people who will espouse and act in accordance with their values. Similarly an employee’s perception of the organisation’s values is a strong predictor of commitment, with the humanity factor being particularly important. Organisations that value professionalism, friendliness, courtesy, co-operation, fairness, forgiveness, honesty and integrity are more likely to nurture strong commitment from their employees.
In the short-term, organisations need to quantify the staff retention problem and analyse trends. Conducting a tailor-made labour retention study will enable them to identify ‘high-risk’ categories of employees, find out what they want and act on it.
Employees need to feel they are increasing their market value and believe they are with an employer whose values they can identify with. Consequently, longer term retention needs to permeate all aspects of an organisation’s people strategy; finding the right people, valuing them and providing opportunities to develop their skills.
Recruitment and selection
Staff retention effectively begins with seeking the right person for job and ensuring a good fit with the organisation – an effective assessment process is essential in this respect.
Organisations need to balance selling the job and presenting a true and honest picture during the recruitment and selection process. (Expectations not met are a common cause of dissatisfaction and lack of commitment – particularly amongst graduates).
Employers can help to manage these expectations by providing applicants with a realistic job preview which describes the responsibilities and objectives, key tasks and challenges.
Managing diversity
In terms of finding and keeping staff, the benefits of such strategies include access to a wide pool of talent at entry to the organisation, a working environment where people are treated with dignity and respect and providing flexible benefits that meet the individual’s need. (For example, Boots estimates it saves £1 million annually in recruitment and training costs by providing employees with term-time working, paternity and career breaks.)
Research shows that flexible hours, telecommuting and other policies that enable employees to strike a comfortable work-life balance are key retention factors.
Development
Employees are looking for advancement opportunities and a chance to enhance their skills. Development programmes can help to faster greater loyalty.
Motivation and organisational commitment
Non-monetary factors are often more important in determining employee commitment. These include:
- The working environment
- Support from and quality of colleagues
- Access to leading-edge technology and equipment.
- Autonomy: a high level of control over how staff work, input into decision making.
- Achievement: the opportunity to put highly developed skills and knowledge to best use (challenging and stimulating work)
Part of good terms: find out why the employee wants to leave:
- In our experience many employers attribute the act of resignation to a failing on the part of the employee. This may well be justified on occasions but generally this blindness limits the organisation’s ability to learn and adapt.
Organisations should be open to the possibility that the person may be interested in returning. Holding ‘re-entry’ meetings and maintaining regular contact with past employers are worth considering